New South Wales v Commonwealth (No 2)

The State of New South Wales applied to the High Court for a certificate under section 74 of the Constitution to appeal to His Majesty in Council regarding questions as to the limits inter se of the constitutional powers of the Commonwealth and the State. These questions arose from an action brought by New South Wales seeking declarations that the Financial Agreements (Commonwealth Liability) Act 1932 and the Financial Agreements Enforcement Act 1932 were invalid and ultra vires the Commonwealth Parliament, and an injunction restraining the Commonwealth from enforcing them. The High Court, by a majority of four to two, refused the application for the certificate.

The legal issues before the High Court concerned the validity of Commonwealth legislation enacted to enforce financial agreements made under section 105A of the Constitution. Specifically, the Court had to determine whether the Financial Agreements Enforcement Act 1932, particularly Part II concerning enforcement against State revenue, was within the constitutional powers of the Commonwealth Parliament. The State of New South Wales argued that this legislation improperly interfered with State revenues and functions, while the Commonwealth contended for its validity.

The majority of the High Court, comprising Gavan Duffy C.J., Rich, Starke, Dixon, and McTiernan JJ., reasoned that while section 74 of the Constitution allows for appeals to the Privy Council in special circumstances, such cases must be rare. They found that the immediate and final determination of the dispute, which involved the potential interception of State revenues by the Commonwealth, was a responsibility cast upon the High Court by the Constitution. Therefore, despite the importance of the constitutional questions and the division of opinion within the Court, the majority concluded that the application for a certificate should be refused, emphasizing the need for finality in such matters. Evatt J., dissenting, believed that the division of opinion, the transcendent importance of the questions, and the serious implications for State governance constituted special reasons warranting a certificate.